Someone recently bought our

students are currently browsing our notes.

X

Vitiating Factors Super Summaries Notes

Law Notes > Contracts 2 Notes

This is an extract of our Vitiating Factors Super Summaries document, which we sell as part of our Contracts 2 Notes collection written by the top tier of University Of New South Wales students.

The following is a more accessble plain text extract of the PDF sample above, taken from our Contracts 2 Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Contracts Super Summaries - Vitiating Factors Concept

Key Cases

Issue

Frustration

Taylor v Caldwell - the music hall case

Was the contract frustrated

"Destruction of the subject matter"

Principle

*

A contract is frustrated where:

Ratio

*

Comments The basis of the contract was the continued existence of the music hall

o From the nature of the contract the parties would know it couldn't be completed unless a thing continued to exist and they contemplated its continuing existence as the foundation of what was to be done

*

The Music hall ceased to exist without the fault of either party - they are both excused from their obligations

o Then the contract is a contract subject to an implied condition that the parties shell be excused if performance is impossible from the thing's perishing "Disappearan ce of the basis of the contract"

Krell v Henry - a coronation case

Was the contract frustrated?

*

The steps are:

*

Compare to Herne Bay - ship hired to view the royal navy revue. Even if the contract expressly stipulates a purpose - this is not enough for the inference of a conditional contract. Could be that it included a cruise 'round the fleet'

The coronation procession was the foundation of the contract

o What is the substance or foundation of the contract (from terms/inference of surrounding circs)

*

Its non-happening was an event not reasonably supposed to have been in the contemplation of the parties when the contract was made?

o Was performance prevented?
o Was the event that prevented performance of

*

Adding to Lord Radcliffe's statement in Davis

*

Contractors - there should be a change in the significance of the obligations (not determinative)

*

Note Davis Contractors - huge shortage in labour and materials didn't make the contract fundamentally different

Also note illegality - this frustrates the contract as it happened in Fibrosa and the Sewer Canal Cases

such a character it cannot reasonably be said to have been in the contemplation at the date of the contract Brisbane City Council v Group Projects- Crown ninjas land

The starting point of all contracts is pacta sunt servanda but the loss lies where it falls

The advantages sought after by the contract were not commercial in nature

*
Preferred Lord Reid's approach - did acquisition

The obligations were not rendered impossible since most of the work was required to be taken off land

give rise to a fundamentally different situation?

*

BUT the acquisition deprived GP of all the "desire" to proceed with the work

*

Crown acquisition gave rise to a fundamentally different situation than that

Foreseeability may lead to the inference that it would be provided for and thus the parties would bear the risk of its occurrence. e.g. Labour and materials not being available in Fareham UDC was 'before their eyes and could have been the subject of

Contracts Super Summaries - Vitiating Factors contemplated when the contract was entered into - the contract should be regarded as coming to an end on acqusition

*

Codelfa

special contractual stipulation'

*

"Frustration occurs whenever the law recognises that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract. Non haec in foedera veni. It was not this that I promised to do"
- Lord Radcliffe Davis Contractors Ltd v Fareham UDC [1956] AC 696, 729

Frustrated Contracts

*

The Act came as a result of the Fibrosa case

o

*

War declared therefore performance illegal

Purpose of the acts was to divide up costs and damages in the event of frustration

o

s7 - One is discharged in the future from performing any obligation under the contract

o

But supposing one has performed and this performance has been provided to the other party (entirely or partly - it just matters that they received its10 - complete performance. Prima facie requires total payments11 - part performance which has been received

Contracts Super Summaries - Vitiating Factors

*

First, one must pay the "rateable" (e.g. 10% for 10% amount for what is received.

o

Unless the cost of producing this partial performance is more than the rateable proportion. In this case the performer has to split the difference between what's been paid and what it cost.

o

s12 - If money is paid early or at all, it is returned

o

s13 - When one incurs costs and gets nothing for ito

The general rule was that half the costs were recovered but if there is a value in what you have done, (then assuming it is sold ?
market value), then credit of half the value of what you partly made is given back

s15 is the main section of the act that gives the court jurisdiction to divide money in its complete discretion ? method by which the court may allocate costsIf other sections are manifestly inadequate, inappropriate, would cause manifest injustice or would be excessively difficult the court will adjust "as it considers proper"

s7 ? s10 or 11 ? s12 ? s13 ? s15

Concept

Key Cases

Issue

Common Mistake -

McRae v CDC

Was the contract

Principle

*

The case is one of construction, not of mistake - but even if it was a case of

Ratio

*

The Commonwealth were guilty of the grossest negligence - they had no reasonable grounds for the belief the tanker

Comments

A mistake cannot exist if it is the fault of either party e.g.

Contracts Super Summaries - Vitiating Factors Res Extincta

vitiated by mistake?

mistake; one cannot rely upon their own negligence

existed and they deliberately induced the belief that it did

*

But since it was a case of construction - this case was not one of an implied condition precedent - there was no common assumption to justify this conclusion

While the commission officers made an assumption the plaintiffs didn't. They would have believed that they could accept the Commission's assurance that there was a tanker

Fraud as per Derry v Peek (statement said which is false and known to be false or maker is reckless as to its falsehood) ? contract is voidable

Compare to Courtier v Hastie - the corn case - mistaken belief in the existence of something voids the contract

Note also cases of Res Sua - Mistake as to ownership. Cooper v Phibbs - someone leases a fishery and the other is unaware that he already owns the lease due to a series of entitlement wills "nemo dat quod non habet" - no one can give what he does not have

Mistake as to quality or subject matter

Bell v Lever Bros - compensatio n for termination but there were breaches

Was there a mistake as to quality?

*

A contract is voidable for mistake if it is a mistake as to some quality which makes the thing without the quality essentially different from the thing as it was believed to be

*

turns out it had already been broken and could have been terminated otherwise

*

The contract which is released is the same - regardless of whether it is broken or terminated

*
Was there a common mistake

If the parties comply with the essentials of formation they are bound and must rely on the stipulations of the contract for protection

*

A contract is voidable for mistake if it contains a term that a particular assumption is a condition of the contract

Solle v Butcher - the flat, legal price increases

An agreement to terminate a definite contract is not void if it

*

The only type of mistake rendering a contract void at CLAW is a mistake as to prevent formation of the contract at all

The identity of the subject matter was not destroyed by mutual mistake

*

Terms can be implied into the contract to ensure a just result in rescission - the lease should be set aside if the defendant is prepared to permit the plaintiff to be a licensee

Contracts Super Summaries - Vitiating Factors

*

(equity)

In equity a contract may be set aside if there is a fundamental misapprehension as to a parties relative rights

*

Great Peace Shipping - ship distance case

To restore coherence to the law: there is

While he is a licensee a notice should be served permitted the increase to the said amount

*

no jurisdiction to grant rescission for common mistake in equity where it is valid and enforceable at common law

present was a telling indication that proximity didn't make it essentially different from what they envisaged

*

Essentially different

Evidence of not wanting to cancel unless an alternative was

Criticized Denning LJ's chimera in Solle v Butcher

The proximity didn't mean it was impossible (else they would have held on to the contract)

*

Svansio - hotel built on other land

Concept

Key Cases

Mistake - parties not in agreement

Smith v Hughes - the old oats case

Cases of common mistake are rare and

*

unlikely to go beyond cases of total failure of consideration (may go to partial failure)

Issue

Principle

*

Where one chooses to act on their own judgement when he has full opportunity of inspecting - caveat emptor applies

There was no more than a partial failure of consideration - the contract was never void and at most liable to be set aside in equity on grounds of failure to show good title

Ratio

Comments

Cockburn J

Roffles v Wichelhause - classic case 'ex peerless' - which one? A reasonable person wouldn't know

*

Both parties agreed to the sale of a particular parcel of oats

*

Parties are not not ad idem simply because one party has a motive operating on themselves to induce himself to buy with one of the essential conditions of the contract

*

The defendant believed them to be old and was thus induced to agree to buy them - but he omitted to make age a condition of the contract

*

Though the two minds weren't ad idem as to age - they

Both Cockburn and Blackburn use the analogy to buying a horse believed to be sound without a warranty that it is

were as to sale and purchase RELIEF OF

Taylor v Johnson - got

*

A party entering into a contract under a

*

It was common ground that Ms Johnson was under a

Liber v Air NZ [VR] - may be enough to show that he

Contracts Super Summaries - Vitiating Factors RESCISSI ON GRANTED IN EQUITY

it wrong in the contract 15k instead of 15k/acre

serious mistake about its contents in relation to a fundamental term will be entitled in equity to rescind if the other party is aware that circumstances exist which indicate that the first party is entering the contract under a serious mistake or misapprehension about either the content or the subject matter of that term and deliberately sets out to ensure that the first party does not become aware of" it

mistaken belief as to price

*

Taylor believed this and:

o

He didn't mention it

o

When procuring the option including the wrong statement, he said he didn't have a copy which he could make available

o

chooses to leave the mistaken party under the misapprehension

XCB v Creative Brands
[2005] VSC - "something more than mere knowledge...and a failure to correct is required"

He therefore deliberately set out to ensure she wasn't aware she was being induced to grant the option

Unilateral Mistake

Hartog v Colin
& Shields - Argentinean hare skins

*

Argentinian hare skins are sold by weight or by number

*

The purchaser thinks he is getting a bargain because the weight/number sale is in his favour while the vendor thinks he is selling a cheap thing expensive

*

Because the price was clearly know to the other buyer to be clearly wrong - there was a unilateral mistake

? The contract is void if the other party knows of the mistake? To what extent is this overruled in Taylor?

Concept

Key Cases

Issue

Rectificatio n

Maralinga v Major Enterprises - he signed anyway thinking it meant something else

Can rectificatio n be granted?

Principle

*

Rectification is granted if someone established

Ratio

*

the intention which he desires to be made conformable continued concurrently in the mind of all parties to its time of execution

*

He must also shew the precise form to which

The appellant's agent didn't intend to give effect to the entire antecedent agreement by signing - he was content to accept the auctioneer's statement and the appellant knew this

*

the deed out to be brought

They were not mistake as to its contents but to the legal effect of the contract - this isn't a ground for rectification

*

The rule where one party knows a mistake in its favour does not apply - there was no relevant mistake as to

Comments

Ronald Walker - case??

Contracts Super Summaries - Vitiating Factors contents

*

Pokallus v Cameron - belief in extra land part of another subdivision

For rectification there must be an intention

*

common to both parties to include a term which as omitted by mutual mistake

*

The plaintiff must advance convincing proof that the contract doesn't embody their final intention

There is no evidence to support a finding of an intention to contract for the sale of extra land - the intention was to transfer subdivision 1 which was thought to contain this land

*

Even if a new boundary was in contemplation they have to prove the precise term which it was said was agreed to and not incorporate - it isn't sufficient to prove an intention

Summary of Mistake in Class 14 Notes - May be useful to print out and attach. Must make clear what is the equitable and CLAW jurisdiction Note that an action in equity is described as a suit whereas in common law it is a claim Concept

Key Cases

Issue

Mistake The identity cases

Cundy v Lindsay ?
similar to Phillips v Brooks

Did a contract exist?

Principle

*

Ratio

A contract could have never arose between the respondents and the rogue (Blenkarn) they never intended to deal with him and hence there was no consensus ad idem

*

The property remained the property of the respondents and the title which Blenkarn attempted to give to another was one which could not be given

King's Norton v Eldridge

*

The plaintiff intended to contract with the writer of the letters; if it can be shown that the fake company was a separate entity to the rogue it would fall into the principle in Cundy v Lindsay

*

There was a contract between those who wrote the letters; and by virtue of this the property passed from the rogue

Shogun Finance v Hudston - faked curry

*

Shogun's intention was to contract with the real Patel - by construction the written agreement was between Shogun and Patel and could not arise without Patel's authority

Comments

Skinner says there is no AU authority on point. In an exam there is a presumption that the contract is voidable when dealing with a fraudster. Also, practically speaking - how is it possible to rescind a voidable contract when the fraudster is missing?
Skinner says that either this case is wrong or right because there was never a person that the fraudster took the identity from - he didn't pretend to be someone who existed

Buy the full version of these notes or essay plans and more in our Contracts 2 Notes.